Washington Home Sales Slide, Prices Remain Strong

PULLMAN, Wash.– Consistent with reports received from other parts of the country, home sales in Washington retreated from the record pace of 2005, but remained very strong in historic terms.  Home prices, as indicated by medians, continued to increase at double-digit rates, reported the Washington Center for Real Estate Research at Washington State University.  Glenn Crellin, director of WCRER said that, “Despite a slower sales rate, the housing market is still strong.  As more homes come on the market buyers have the opportunity to choose homes which match their needs, and individual homes may be selling for less than might have been received at the market peak, but unless the home was purchased very recently and must be sold quickly, sellers are still enjoying strong returns.”

Fewer homes were sold during the second quarter of 2006 in 36 of Washington’s 39 counties than during the April through June period last year.  The statewide decline in sales was 12.5 percent, with most counties experiencing similar patterns of decline.  Among the largest counties, King County sales declined 13.7 percent, Pierce County slipped 10.7 percent, Snohomish County slid 11.8 percent, and Spokane County declined 11.9 percent.  The sharpest declines were seen in Island and Jefferson counties, each of which experienced nearly a 33 percent dip.  The counties seeing stronger sales were Yakima, Thurston and Grant.  There were enough listings available for sale at the end of June to sustain the market at the sales rates experienced throughout the last year for nearly 3.5 months, somewhat below the inventory required to avoid significant inflationary pressure on housing.  With inventories increasing and sales rates slowing, the market may approach a balanced situation shortly.

The strong market continued to be reflected in rapidly increasing prices, although the pace of increase is beginning to slow.  The statewide median soared to $293,000 during the first quarter, a level 14.9 percent above a year earlier, but a slower increase than during the last two quarters.  All counties reported median prices above those of a year ago, but the increases varied widely, from 2.9 percent in Benton and Franklin counties (Tri-Cities) to 42.4 percent in San Juan County.  Adams County was the only area reporting a median price below $100,000 ($99,000).  San Juan County had the highest median price, $640,000, by a substantial margin, with King County’s $429,000 median a distant, but expensive, second.  Yakima again had the least expensive homes among urban communities, with a median price of $133,500.

Terry Sullivan, 2006 President of Washington REALTORS® from Spokane County said, “While mortgage interest rates remain well below those of the 1980s and 1990s, they have increased enough to make housing unaffordable for many Washington households.  Until policies begin to encourage construction of affordable-ownership homes, it will be difficult for Washington to compete for the new businesses necessary for our state to continue to prosper.  The state’s population and employment have both increased significantly in the last decade, while the housing stock has only increased marginally.”

The Housing Affordability Index, which measures the ability of a middle income family (two or more persons related by blood, marriage or adoption) to afford to purchase a median price home using a 30-year mortgage at prevailing interest rates, highlights the growing problem.  In the second quarter the all-buyer index slipped further below 100, registering 87.9.  This means a typical family has only 88 percent of the income required for the purchase of a median price home; purchasing the home will require a larger than average down payment or a lender willing to extend the usual underwriting standards.  Buyers in 13 counties faced index values below 100 (compared to seven counties three months ago), with the problem especially apparent in San Juan, Jefferson and King counties, which had all-buyer index values ranging from 36.5 to 70.4.  At the other extreme, four counties had index values above 150, suggesting the typical family would not have much difficulty qualifying for a median price home in those mostly remote areas.

“Affordable homes for first-time buyers is especially challenging,” said Crellin.  “Only three counties offer the typical entry-level buyer the opportunity to afford a typical starter home, and only Benton County is in an urban area.”  The first-time buyer affordability index for the second quarter stood at 51.3, the fifth consecutive quarter of record low affordability (since 1994).  Among urban areas, first-time buyer affordability index values ranged from a low of 39.4 in King County to a high of 102.2 in Benton County. 

WCRER has produced these statistics in partnership with the Washington REALTORS® since early 1994.  Each quarterly release is timed to coincide with news releases of existing home sales by state and median home prices by metropolitan area from the National Association of REALTORS®. Sales data is available for each county and median home prices and affordability are reported for 36 of Washington’s 39 counties.

The Second Quarter 2006 Housing Market Snapshot can be viewed online at the WCRER Web site, https://www.cb.wsu.edu/~wcrer/HMUPDATE/2006Q2/SNAP06q2.pdf.